Just prior to writing this, I chaired a panel debate for the UKs Pensions Management Institute in London on the various types of risk sharing arrangements which could be implemented in the UK. The background to the debate was that as it stands all the risk rests either with the sponsor when it comes to defined benefit schemes or with the employee when it comes to defined contribution schemes
One of the interesting points which came out was that perhaps UK society, and I suppose society in many other countries where raw DC is taking over, is not willing to share. People want what is theirs and are not prepared to share risk either between their co-workers or between the generations.
It was argued that for countries like the UK and US which went through their ‘greed is good’ phases under Margaret Thatcher and Ronald Reagan, the idea of sharing has disappeared.
I find this worrying. Because ultimately raw DC will never withstand something like a cure for cancer which would see a massive spike in average mortality. Such a spike would considerably decrease the annual income paid out by conventional annuities and leave many pensioners struggling to make ends meet. By the same token, this development would also do for most DB systems too because of their instance on honouring a rigidly defined benefit, rather than showing flexibility when circumstances require.
One of the speakers at the conference noted that across the world pensioners had taken to removing their clothes when protesting at their impoverishment. Given we are told the western world is becoming an ageing society, we may be viewing a lot more naked elderly as the ratio of workers to retired increases.
Ultimately, what is required is greater flexibility to deal with the fact that retirement provision simply has too many moving parts to expect one party to shoulder all of the risk burden.
On a lighter note, I think I may be the first to report green shoots. Not in the economy, but rather in the ageing of western society. My source? The maternity hospital which I visited with wife for a pregnancy scan.
The midwife there told me she had seen a 33% increase in business over the last 12 months. She blamed the credit crunch, saying people are staying in to save money and that one thing tended to lead to another. She called the results of this spike in pregnancies credit crunch babies, not nearly as groovy sounding as baby boomers, but I reckon we should take what we can get.
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers